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The zones of discrimination for M-Score is as such:
An M-Score of less than -2.22 suggests that the company is not an accounting manipulator.
An M-Score of greater than -2.22 signals that the company is likely an accounting manipulator.
During the past 13 years, the highest Beneish M-Score of EMC Corp was -1.85. The lowest was -3.74. And the median was -2.77.
The M-score was created by Professor Messod Beneish. Instead of measuring the bankruptcy risk (Z-Score) or business trend (F-Score), M-score can be used to detect the risk of earnings manipulation. This is the original research paper on M-score.
The M-Score Variables:
The M-score of EMC Corp for today is based on a combination of the following eight different indices:
|M||=||-4.84||+||0.92 * DSRI||+||0.528 * GMI||+||0.404 * AQI||+||0.892 * SGI||+||0.115 * DEPI|
|=||-4.84||+||0.92 * 0.8695||+||0.528 * 1.0032||+||0.404 * 0.9413||+||0.892 * 0.9957||+||0.115 * 0.9732|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0231||+||4.679 * -0.0826||-||0.327 * 0.9013|
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $2,896 Mil.|
Revenue was 6017 + 5475 + 7015 + 6079 = $24,586 Mil.
Gross Profit was 3736 + 3260 + 4360 + 3705 = $15,061 Mil.
Total Current Assets was $16,550 Mil.
Total Assets was $46,745 Mil.
Property, Plant and Equipment(Net PPE) was $3,725 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,950 Mil.
Selling, General & Admin. Expense(SGA) was $8,414 Mil.
Total Current Liabilities was $11,403 Mil.
Long-Term Debt was $5,479 Mil.
Net Income was 581 + 268 + 771 + 480 = $2,100 Mil.
Non Operating Income was 12 + 17 + 73 + 47 = $149 Mil.
Cash Flow from Operations was 1608 + 932 + 1870 + 1403 = $5,813 Mil.
|Accounts Receivable was $3,345 Mil.
Revenue was 5997 + 5613 + 7049 + 6032 = $24,691 Mil.
Gross Profit was 3587 + 3339 + 4505 + 3743 = $15,174 Mil.
Total Current Assets was $14,087 Mil.
Total Assets was $44,867 Mil.
Property, Plant and Equipment(Net PPE) was $3,788 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,903 Mil.
Selling, General & Admin. Expense(SGA) was $8,259 Mil.
Total Current Liabilities was $12,507 Mil.
Long-Term Debt was $5,472 Mil.
1. DSRI = Days Sales in Receivables Index
A large increase in DSR could be indicative of revenue inflation.
|DSRI||=||(Receivables_t / Revenue_t)||/||(Receivables_t-1 / Revenue_t-1)|
|=||(2896 / 24586)||/||(3345 / 24691)|
2. GMI = Gross Margin Index
Measured as the ratio of gross margin in year t-1 to gross margin in year t.
Gross margin has deteriorated when this index is above 1. A firm with poorer prospects is more likely to manipulate earnings.
|=||(GrossProfit_t-1 / Revenue_t-1)||/||(GrossProfit_t / Revenue_t)|
|=||(15174 / 24691)||/||(15061 / 24586)|
3. AQI = Asset Quality Index
AQI is the ratio of asset quality in year t to year t-1.
|AQI||=||(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t)||/||(1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)|
|=||(1 - (16550 + 3725) / 46745)||/||(1 - (14087 + 3788) / 44867)|
4. SGI = Sales Growth Index
Ratio of sales in year t to sales in year t-1.
Sales growth is not itself a measure of manipulation. However, growth companies are likely to find themselves under pressure to manipulate in order to keep up appearances.
5. DEPI = Depreciation Index
Measured as the ratio of the rate of depreciation in year t-1 to the corresponding rate in year t.
DEPI greater than 1 indicates that assets are being depreciated at a slower rate. This suggests that the firm might be revising useful asset life assumptions upwards, or adopting a new method that is income friendly.
|DEPI||=||(Depreciation_t-1 / (Depreciaton_t-1 + PPE_t-1))||/||(Depreciation_t / (Depreciaton_t + PPE_t))|
|=||(1903 / (1903 + 3788))||/||(1950 / (1950 + 3725))|
6. SGAI = Sales, General and Administrative expenses Index
The ratio of SGA expenses in year t relative to year t-1.
SGA expenses index > 1 means that the company is becoming less efficient in generate sales.
|SGAI||=||(SGA_t / Sales_t)||/||(SGA_t-1 /Sales_t-1)|
|=||(8414 / 24586)||/||(8259 / 24691)|
7. LVGI = Leverage Index
The ratio of total debt to total assets in year t relative to yeat t-1.
An LVGI > 1 indicates an increase$sgai= in leverage
|LVGI||=||((LTD_t + CurrentLiabilities_t) / TotalAssets_t)||/||((LTD_t-1 + CurrentLiabilities_t-1) / TotalAssets_t-1)|
|=||((5479 + 11403) / 46745)||/||((5472 + 12507) / 44867)|
8. TATA = Total Accruals to Total Assets
Total accruals calculated as the change in working capital accounts other than cash less depreciation.
|=||(NetIncome_t - NonOperatingIncome_t||-||CashFlowsfromOperations_t)||/||TotalAssets_t|
|=||(2100 - 149||-||5813)||/||46745|
An M-Score of less than -2.22 suggests that the company will not be a manipulator. An M-Score of greater than -2.22 signals that the company is likely to be a manipulator.
EMC Corp has a M-score of -2.99 suggests that the company will not be a manipulator.
Altman Z-Score, Piotroski F-Score, Accounts Receivable, Revenue, Gross Profit, Total Current Assets, Total Assets, Property, Plant and Equipment, Depreciation, Depletion and Amortization, Selling, General & Admin. Expense, Total Current Liabilities, Long-Term Debt, Net Income, Non Operating Income, Cash Flow from Operations
EMC Corp Annual Data
EMC Corp Quarterly Data